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Discounted Rate Mortgage

What is a Discounted Rate Mortgage?

A Discounted Rate Mortgage is a reduction on a mortgage lender's Standard Variable Rate (SVR) of interest that applies only for a set period of time. Usually these are only intended to be an introductory offer. When the standard variable rate fluctuates, the discount will remain fixed, however, the amount of discount and the period will vary from deal to deal.

Discount mortgages tend to be more suitable for people who prioritise low initial payments at the expense of higher rates later on, such as first time buyers whose income isn't particularly high but want to have some money to spare for other necessities. The discount rates usually last from six months to about five years and generally the shorter the period of discount, the higher the discounted rate will be.

Q: What is the difference between a discount rate mortgage and a tracker mortgage?

A: While a tracker mortgage adjusts based on the Bank of England base rate, a Discount Rate Mortgage varies based on the lender’s Standard Variable Rate.

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